Most Visionary Relationship

1997 Editor’s Choice Award
Beaumont Hospital/PWC

Like most health care delivery organizations, William Beaumont Hospital is under constant pressure from the government and insurance companies to find new ways to reduce costs. For the hospital, which has been ranked as one of the best places in the country to work, the need to achieve those results without sacrificing the quality of patient care or the tradition of being a caring employer was imperative. A chance encounter back in 1995 sparked the idea for a partnership that is proving to be a perfect fit in achieving those goals.

It all began when Michael Boyle, associate hospital director, attended a meeting of people allied through a local construction consumers’ council. At that meeting, ReSourcing Services Company, LLC (RSC), a company led by Price Waterhouse and Jacobs Engineering, gave a presentation on the work they had done with Ameritech, the mid-western telecommunications company. What captured Boyle’s attention was the fact that not only had Ameritech’s employees not been displaced, but that both the employees and their former employer had benefited from this relatively new concept of ReSourcing.

“I listened in that presentation to an employee who went through it, and a light went on in my head,” said Boyle. “I could take a similar group of people and not displace them, retain them and perhaps improve their job security, which was tenuous given the economic pressures that the health care industry is under right now. I could give them the opportunity to succeed beyond their current ability.”

Laying the Groundwork

After the meeting, Boyle called RSC, and the groundwork was laid for a new partnership between that company and the hospital. The resulting entity is Beaumont Services Company, LLC (BSC), a 50-50 partnership between RSC and William Beaumont Hospital. BSC is responsible for facilities development, which includes planning, design, construction and maintenance, and bio-medical engineering BSC is staffed by former Beaumont employees who continue to deliver all the services they formerly provided.

“They are greatly enhanced now by the support of Price Waterhouse and Jacobs Engineering,” said Boyle. “They provide an element of management expertise and world class process improvement skills that we were seeking but could not find.”

The path to the partnership began with a study in which Beaumont Hospital commissioned RSC to “map every work process in our facility,” according to Boyle. The aim of the study, which took place over approximately six months, was for RSC to determine if the potential for cost reduction and improvement was significant enough to warrant a relationship.

“It was extremely thorough in every detail,” said Boyle, “and it did, indeed, identify very significant opportunities for savings, in excess of $7 million for the year. That’s not just pocket money.”

Looking Ahead

The next step was to determine the type of relationship. The parties decided to become risk-sharing partners. That decision, Boyle believes, can lead to additional opportunities.

“When this work force is brought to the world class level that we truly expect they can achieve, there is an opportunity to market it and become a source of revenue for the hospital,” he said. “Before, it was just a cost center, not a revenue center.”

After two years of preparation, BSC was officially launched on November 2, 1997. A major part of the preparation was what Boyle calls a “transitioning process.”

“In the 10 months before November 2, we began to transition the employees from their perception as hospital employees to acceptance of a new company and entity,” he said. “That was dictated to us by the board of directors of the hospital. They are very sensitive here. We didn’t want employee unrest.”

The board wanted Beaumont Hospital to enter the relationship slowly and allow the employees first to become acclimated to the change and then to develop enthusiasm for the move. As a result, Boyle said most of the employees are completely behind the partnership.Although a small percentage “are grumpy,” he said the result is better than they might have expected.

A Focus on People

One reason for the success is that the transition focused on the soft side of outsourcing. By calling the process ReSourcing, the partnership underscores the concept that no one can do the job better than the people who are already doing it. One of the tenets of RSC is that as important as design, process changes and technology might be, the more important element is the creation of empowered teams.

“This is very people focused,” said Boyle. “These facility folks take care of folks who take care of the patients. It is a very caring atmosphere, and that translates into how we handle employees and how we value them.”

He noted that the publication, Facilities Management, had named the hospital’s staff as the outstanding maintenance organization in the country for the past two years. As satisfying as that was in some respects, it also created some frustration in Beaumont Hospital’s efforts to improve because the hospital became the company against which others benchmarked. The BSC partnership, said Boyle, was “a real gem of an idea,” providing new avenues for improvement.

One of the improvements was giving employees a stake in the success of the company. They receive bonuses if the company reaches its objectives. “With those objectives in mind, these guys are really starting to get energized,” said Boyle.

Adjusting the Fit

The contract between the hospital and BSC is for six years, during which time BSC will not do business with any other company without Beaumont Hospital’s approval. Boyle said, “There is every expectation that (the contract) will be renewed in perpetuity, but at the outset, we agreed upon six years.”

The parties also agreed to take the first six months of operation to develop the matrixes for measurement of progress.

“That’s only fair,” said Boyle. “In the beginning, you don’t know what you don’t know. It takes a while, and we agreed to work on that collaboratively.”

BSC faces some “rather tough” financial objectives, he said, with part of their performance fee based on achieving those objectives. The new company’s budget for 1998, for example, is limited to the amount the hospital spent for the same functions in 1997. That fact means that BSC will absorb most of the additional start-up costs in the first year, if they are to receive their performance fees.

“Their challenge is daunting,” said Boyle. “It isn’t a walk in the park.”

Despite the challenge, he anticipates success. If BSC can achieve its goals, the new company can carve its own niche in the health care industry. Beaumont Hospital then will benefit not only from superior services but from the opportunity presented by the development of a new business.